One of the country’s largest real estate investors has handed back the keys for two large Aliso Viejo offices to its lender.
Two buildings at Aliso Viejo’s Summit Office Campus, including the office that holds the local operations for Miami-based homebuilder Lennar Corp., recently went back to the lender.
The offices had been owned by RREEF America LLC, a real estate investment unit of Germany’s Deutsche Bank AG, and one of Orange County’s largest office owners.
CalSmart LLC, a partnership of RREEF and the California Public Employees’ Retirement System, also had been an investor in the project, according to sources.
The buildings are mostly full. RREEF opted not to keep making debt payments and funding operational expenses after their value had been cut in half in recent years to well below what is owed on them, according to sources.
The lender taking over ownership for the property is Allianz of America Inc., part of Germany’s Allianz SE, Europe’s biggest insurer.
Allianz has hired brokers from Cushman & Wakefield Inc.’s Irvine office to market the buildings for lease. Space is being listed at monthly rents of about $2.20 per square foot.
The buildings aren’t listed for sale, according to data from real estate market tracker CoStar Group Inc.
The change in ownership is one of the largest lender-driven deals in South County resulting from the commercial real estate downturn.
The two five-story buildings, at 25 Enterprise and 15 Enterprise, total nearly 300,000 square feet of office space. They’re listed as being more than 80% full, although a substantial amount of occupied space in the buildings is through subleases struck in the past two years.
The offices were built in 2001 through a venture led by Aliso Viejo-based Parker Properties LP, developer of the 1.8 million-square-foot Summit Office Campus alongside the San Joaquin Hills (73) Toll Road.
Parker sold a majority of its interest in the two buildings to RREEF in 2007.
The buildings were given back as a deed-in-lieu of foreclosure, where a borrower gives up a property to forgive a loan balance.
The amount of debt wasn’t disclosed but likely is more than what the buildings are worth. Industry sources estimate the buildings to be worth about $50 million, down about 50% from 2007 when RREEF made its investment.
Officials for RREEF declined to comment.
Tenant retention issues at the buildings could have been a deciding factor, according to sources not involved in the transaction.
Lennar, whose day-to-day operations are largely run out of the 25 Enterprise building, signed a 137,352-square-foot lease at the building back in 2003, moving several hundred workers from Mission Viejo and other local offices.
The lease, which ends late next year, was valued at about $27 million at the time it was struck—putting Lennar’s monthly rents at roughly $2.18 per square foot.
The builder, which has cut back local operations during the housing downturn, hasn’t announced its next moves. It had been looking to sublease space on several floors of its building since early 2008.
RREEF’s Portfolio
It’s the first known example of a local RREEF property going back to its lender during the current commercial real estate crisis. Other than a $750 million Santa Clara county mixed-use project that saw foreclosure proceedings begin last September, there’s been few reports of the investor’s California properties being in financial trouble.
RREEF has ownership stakes in several other Summit offices, including recent developments at the campus. None of those buildings are known to be in financial distress.
All told, RREEF’s domestic real estate division, which is based out of San Francisco, counted a portfolio of 120 million square feet, with a value close to $25 billion, the company said late last year.
RREEF managed about 6.6 million square feet of space in OC last year, according to the Business Journal’s 2009 ranking of property managers, which came out in May.
Local buildings in its portfolio include more than 2 million square feet of industrial buildings in Fullerton, Costa Mesa’s MetroCenter at South Coast offices, plus the current Aliso Viejo headquarters of Valeant Pharmaceuticals International.
